Wachovia Sba Lending, Inc. v. Kraft

• Decision Date: 15 January 2009
• Docket Number: No. 80318-8.,80318-8.
• Parties: WACHOVIA SBA LENDING, INC., d/b/a Wachovia Small Business Capital, a Washington corporation, Respondent, v. Deanna D. KRAFT, individually, Petitioner.
• Court: Washington Supreme Court

200 P.3d 683

165 Wn.2d 481

WACHOVIA SBA LENDING, INC., d/b/a Wachovia Small Business Capital, a Washington corporation, Respondent, v. Deanna D. KRAFT, individually, Petitioner.

No. 80318-8.

Supreme Court of Washington, En Banc.

Argued May 29, 2008.

Decided January 15, 2009.

Douglas N. Kiger, Blado Kiger PS, Tacoma, WA, for Petitioner.

Alexander Sether Kleinberg, Eisenhower & Carlson PLLC, Tacoma, WA, for Respondent.

Harold T. Hartinger, Attorney at Law, Tacoma, WA, Amicus Curiae on behalf of Harold T. Hartinger.

STEPHENS, J.

¶ 1 Deanna Kraft and Wachovia SBA Lending, Inc., doing business as Wachovia Small Business Capital (Wachovia), became embroiled in a dispute about whether Kraft owed Wachovia payment in connection with a loan. After moving unsuccessfully for summary judgment, Wachovia voluntarily dismissed its suit against Kraft without prejudice under CR 41. Kraft asked for attorney fees and costs, which the trial court denied. We must consider whether, in light of the voluntary dismissal, Kraft is a "prevailing party" as that term is used in RCW 4.84.330. Kraft also asks us to consider whether the trial court erred in failing to dismiss the case with prejudice. Finally, Wachovia asks for attorney fees.

¶ 2 We affirm the holding of the Court of Appeals, concluding that the trial court properly dismissed this case without prejudice and that the Kraft is not a prevailing party entitled to attorney fees under RCW 4.84.330. We further deny Wachovia's request for attorney fees.

I Facts and Procedural History

¶ 3 In 1997, Kraft's husband, Randolph, took out a small business loan from Wachovia in order to purchase a home that would also serve as an in-home veterinary service. Kraft's husband executed a promissory note (Note), secured by a deed of trust (Deed) on the Kraft family home in North Carolina. Kraft did not sign the Note, but she signed a personal guaranty (Guaranty) in connection with the Note, and also signed the Deed on the home. The Guaranty states that the debtor must provide to the lender all sums payable under the Note. The Note includes language that requires the debtor to pay attorney fees and costs arising out of any disputes, but it does not have reciprocal language requiring such payment from the lender. The Deed includes similar language in favor of the lender. In other words, the attorney fees provisions at issue here are unilateral.¹

¶ 4 The Krafts divorced in 1998. Under the separation agreement, Randolph assumed the obligations of the loan. He subsequently filed for bankruptcy. In 2004, the North Carolina home was foreclosed under the Deed. On September 19, 2005, Wachovia brought suit against Deanna Kraft in Pierce County Superior Court to recover the deficiency left on the loan after foreclosure. Trial was set for March 20, 2006. In January 2006, Wachovia moved for summary judgment, which was denied on March 3, 2006.²

¶ 5 On the first day of trial, Wachovia moved for voluntary dismissal without prejudice under CR 41(a)(1)(B). In response, Kraft asked for dismissal with prejudice, arguing that the statute of limitations had run on Wachovia's claim. She also asked the trial court to reserve judgment on her request for an award of attorney fees and costs. The court entered an order of dismissal without prejudice and denied Kraft's request for a later disposition on the question of attorney fees, explaining that to do so would leave the issue to "hang out there for eternity if the parties do decide to settle and go away and never inform this Court." Report of Proceedings at 12.

¶ 6 Kraft appealed both decisions. The Court of Appeals commissioner determined that an order of voluntary dismissal without prejudice is not appealable under RAP 2.2(a)(3), so the court reviewed only the question of attorney fees. Wachovia SBA Lending v. Kraft, 138 Wash.App. 854, 858 n. 4, 158 P.3d 1271 (2007). The Court of Appeals held, in part, that RCW 4.84.330 controls an award of attorney fees where a unilateral attorney fees contract provision applies, and that under that statute, Kraft was not a prevailing party entitled to attorney fees. Kraft appealed both the attorney fees issue and the issue of whether the trial court properly rejected her request for dismissal with prejudice. Pet. for Review at 1. We granted review at 163 Wash.2d 1011, 180 P.3d 1291 (2008).

II Analysis

A. Denial of Dismissal with Prejudice

¶ 7 Kraft argues that because the statute of limitations has run on Wachovia's claim, Wachovia cannot refile this suit and the trial court should have dismissed with prejudice. Wachovia argues that this issue is not properly before the court, as the Court of Appeals concluded the issue was nonappealable under RAP 2.2(a)(3) and did not review it.

¶ 8 We look to the effect of a judgment to determine whether it is appealable. "Where a dismissal without prejudice has the effect of determining the action and preventing a final judgment or discontinuing the action, the dismissal is appealable." Munden v. Hazelrigg, 105 Wash.2d 39, 44, 711 P.2d 295 (1985). Here, the question of appealability presents something of the chicken and the egg problem. If Kraft is correct that the statute of limitations has run, then the dismissal without prejudice is final and appealable. But, we cannot determine whether she is correct unless we review the issue. Accordingly in the interests of justice we find it appropriate to review Kraft's claim. RAP 1.2(c).

¶ 9 Based on the record before us, we conclude that the trial court properly dismissed without prejudice. Kraft failed to plead or allege facts showing that a statute of limitations has run. The North Carolina statute of limitations ends one year from the date of the delivery of the deed pursuant to a foreclosure sale. N.C. Gen.Stat. § 1-54 (2007). The Washington statute of limitations ends one year after the date of the trustee's sale. RCW 61.24.100(4).³ The only facts offered here are that the Deed was foreclosed in approximately 2004 and that Wachovia filed its suit on September 19, 2005. Pet. for Review at 2. Because we do not know when in 2004 the trustee's sale took place, or the date the deed was delivered following foreclosure, we cannot say that the limitation period ran before September 19, 2005. Moreover, the Washington and North Carolina statutes appear to include exceptions and tolling provisions relevant to the running of the statute of limitations, which the parties have not addressed. See N.C. GEN.STAT. § 1-54; RCW 61.24.100(4).

¶ 10 In sum, Kraft has not established that the statute of limitations has run. The trial court properly dismissed the case without prejudice.

B. Attorney Fees under RCW 4.84.330

¶ 11 Kraft seeks an award of attorney fees under RCW 4.84.330, arguing she is the "prevailing party" following the trial court's dismissal of the suit without prejudice. Review of this question is de novo because the meaning of RCW 4.84.330 is a question of law. State v. Watson, 146 Wash.2d 947, 954, 51 P.3d 66 (2002).

¶ 12 CR 41(a)(1)(B) allows a plaintiff to dismiss a suit voluntarily at any time before resting his case, without good cause shown. Such a dismissal will be without prejudice, unless otherwise stated in the order of dismissal, except that a dismissal by a plaintiff who has once before dismissed a suit based on or including the same claim operates as an adjudication on the merits. CR 41(a)(4). There is no allegation in this case that Wachovia previously dismissed a same or similar claim against Kraft. As discussed above, the trial court's order of dismissal without prejudice was proper.

¶ 13 CR 41(a)(1)(B) does not contemplate the award of costs or attorney fees when there has been a voluntary dismissal. In the context of civil actions, the question of costs and attorney fees are dealt with in a series of provisions under chapter 4.84 RCW. These provisions generally award attorney fees to the prevailing party in an action. However, prevailing party is not defined in the same manner in every attorney fees statute. See RCW 4.84.250-.330.

¶ 14 Here, the attorney fees provisions at issue are unilateral. Clerk's Papers at 32, 39. Therefore, RCW 4.84.330 applies. This statute, which is entitled, in part, "Actions on contract or lease which provides that attorney's fees and costs incurred to enforce provisions be awarded to one of parties," provides:

In any action on a contract or lease entered into after September 21, 1977, where such contract or lease specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract or lease, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or lease or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements.

....

As used in this section "prevailing party" means the party in whose favor final judgment is rendered.

RCW 4.84.330.

¶ 15 RCW 4.84.330 is not a fee-shifting statute. A fee-shifting statute is designed to "punish frivolous litigation and encourage meritorious litigation." Brand v. Dep't of Labor & Indus., 139 Wash.2d 659 667, 989 P.2d 1111 (1999). By its plain language, the purpose of RCW 4.84.330 is to make unilateral contract provisions bilateral. The statute ensures that no party will be deterred from bringing an action on a contract or lease for fear of triggering a one-sided fee provision. It does so by expressly awarding fees to the prevailing party in a contract action. It further protects its bilateral intent by defining a prevailing party as one that receives a final judgment. This language must be read into a contract that awards fees to one party any time an action occurs, regardless of whether that party prevails or whether there is a final judgment. Cf. Touchette v. Nw. Mut. Ins. Co., 80 Wash.2d 327, 335, 494 P.2d 479 (1972) (holding that uninsured motorist statute expresses overriding public policy, "so...